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Medicare HMO Adopting Austerity Plan to Stay Alive

Medicare HMO Adopting Austerity Plan to Stay Alive

Health Care

by Laurence Darmiento

After laying off 13 percent of its workforce last month, SCAN Health Plan of Long Beach is renegotiating contracts with many of its hospitals as part of a state-ordered “corrective action plan” aimed at keeping it afloat.

The nonprofit, one of four Medicare HMOs nationwide that provide in-home benefits to frail seniors to keep them out of nursing homes, is undertaking the plan after its reserves fell below acceptable levels last fall.

That plan also included instituting monthly premiums this year of $30 to $40 for members in Orange, Riverside and San Bernardino counties, although not in Los Angeles. It has about 54,000 members.

“We are cutting frills, and we are looking at what else we can do more efficiently,” said Susan Cameron, the company’s acting chief executive.

SCAN, which began operations 18 years ago, traces its financial problems to national and local forces. Nationally, the federal government has only raised reimbursements to Medicare HMOs 2 percent annually for several years, despite double-digit percentage increases in medical costs. That has resulted in large insurers abandoning the market.

Locally, a shift to contracts with medical providers that requires it to pay per diem rates to hospitals when a patient is hospitalized thereby swallowing the risk left the company with unexpectedly higher costs. (In the past, hospitals accepted fixed, or capitated, monthly payments to cover SCAN members.)

Cameron said the company is doing all it can to insulate patients from any cutbacks, and Steve Fischer, a spokesman for the state Department of Managed Health Care agreed.

Amid the turmoil, Sam Ervin, the company’s founding chief executive, retired as of Jan. 1.

Healthy CHW

A regional public service campaign promoting the state’s Healthy Families campaign kicks off next week on several Latino radio stations featuring popular DJ Renan Almendarez El Cucuy de la Manana. But unlike other campaigns on behalf of the California program that provides health coverage to children of the working poor, this one isn’t funded by the state.

Catholic Healthcare West, the large San Francisco-based hospital system with 16 Southern California hospitals, is spending about $260,000 on the campaign, being conducted with several partners.

What’s in it for CHW?

Spokeswoman Joyce Hawthorne says it fulfills the Catholic system’s mission of providing health care to the poor. “The more children that enroll in Health Families and see physicians on a regular basis, the more their overall health outlook will improve,” Hawthorne said.

Many of the system’s hospitals are in areas with lots of uninsured patients the kind of patients who show up in emergency rooms and cost hospitals a bundle in uncompensated care, often with illnesses that would have been far cheaper to treat with a little preventive care.

Staff reporter Laurence Darmiento can be reached at (323) 549-5225 ext. 237 or at

ldarmiento@labusinessjournal.com.

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